Mining companies warned of “dire consequences” for the industry if a revised mining charter is implemented next month as planned, deepening a long-running spat with the government.

Proposed new taxes on company revenue to fund the Mining Transformation and Development Agency would place additional burdens on producers that lost a combined R37-billion ($2.6-billion) last year, the Chamber of Mines said on Thursday in an emailed statement. Anglo American and Glencore are among members of the lobby group which said it was consulted only briefly and is concerned about what may be in the new charter.

Targets in the document may be ill-considered or unachievable, said Roger Baxter, the group’s chief executive officer.

“Its implementation in its current form will have dire consequences for the mining industry and the entire South African economy at a time when both are facing significant challenges,” he said in the statement.

Mining, which employs some 462 000 people, accounted for about 8% of South Africa’s economy in 2015 and about half of the country’s exports, according to industry figures.
The government wants to introduce policies that will speed a fairer distribution of benefits from the nation’s mineral wealth, skewed toward the white minority under apartheid.

The department of mineral resources said Wednesday it plans to finalise the charter next month having made “substantive changes” since the draft it published in April and going through a “thorough consultation process”. The industry lobby group called for urgent discussions.

Among the department’s objectives is to increase black ownership of mining companies and it proposed in April that mines must retain a minimum of 26% black ownership, even if that initial group of investors later sells out. Mining executives have said this will lead to existing investors’ shareholdings being continually diluted.

Court disputeThe chamber took the department to court earlier this year, arguing that previous black economic empowerment deals should still apply even after shares had been sold. The parties are progressing toward an out-of-court settlement on this issue, the department said on Wednesday. The chamber has said it will consider reviving the case if necessary.

The proposed taxes will be overseen by the transformation agency, which would use the funds for skills development and to assist local suppliers, the department said. Foreign suppliers would be charged a 1% levy on revenue.

The chamber said it’s concerned about the agency’s “purpose, cost and oversight” and that its creation would divert funding from skills and education programmes the companies have in place. The lobby group instead proposed a 2% tax on profits.

The department has also increased appointment targets for historically disadvantaged South Africans in companies which, while desirable, are in some aspects “currently unachievable”, the mining lobby group said.

The draft charter calls for black people to hold a minimum of 50% of seats on company boards, with 20% required to be black females, the department said in a presentation on Wednesday. Senior management should consist of at least 60% of black employees, also with 20% being black females. The proportion should be higher at middle and junior management levels. - Bloomberg